LABOR MARKET CONSEQUENCES FOR BUSY DIRECTORS: EVIDENCE FROM INTERNATIONAL MERGERS AND ACQUISITIONS

Stephen P. Ferris, Narayanan Jayaraman and Min‐Yu (Stella) Liao

Journal of Financial Research, 2019, vol. 42, issue 3, 449-489

Abstract: Using 13,233 acquisitions from 57 countries, we examine merger and acquisition (M&A) decisions made by busy boards. We find that few busy acquirers originate from emerging markets and that they tend to undertake cross‐border mergers, favor public targets, finance with cash and equity, pursue nondiversifying mergers, avoid targets with multiple bidders, and long‐term underperform relative to nonbusy acquirers. Importantly, we discover a nonlinear relation between an acquirer's board busyness and merger announcement returns. We find that the labor market penalizes directors who approve bad acquisitions but does not reward them for good mergers. We find a similar nonlinear relation between an acquirer's board busyness and its long‐term performance along with a suggestion of an optimal board busyness.

Date: 2019
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